Floodplains that are regularly inundated for extended periods are important for their high production of organic matter and invertebrates as well as for the provision of seasonal spawning and/or rearing habitat for native fishes. A recent CALFED-sponsored study identified criteria for the flow associated with such floodplains, the "floodplain activation flow" or FAF. The study hypothesized that there is very little remaining FAF floodplain in the Central Valley, because of a combination of flow regulation, channel incision and levee construction. As a result of development on floodplains, there may be few areas where FAF floodplains can readily be restored without either dramatic changes in reservoir management or levee setbacks. Those areas where FAF floodplains can be restored should be high priorities for the restoration community since they offer floodplain function benefits across a broad range of flood magnitudes and support essential ecosystem functions and anadromous fish habitat. One such site is at the confluence of the Feather and Bear Rivers between Sacramento and Yuba City, where a major levee setback was implemented in summer and fall of 2006 as part of a multi-objective flood control and habitat restoration project. The setback will restore 66 acres of floodplain to river flows, with most meeting the criteria for inundation under FAF conditions. This paper presents two facets of the restoration effort: a geomorphic assessment including two-dimensional sediment transport modeling to ensure that the setback does not have unintended consequences for erosion and deposition on the Feather or Bear Rivers, and a two-dimensional hydraulic assessment to optimize habitat restoration on the newly activated floodplain. Levee setbacks such as the one described are likely to represent significant opportunities in future, as they are one of the few ways of achieving both increased flood protection and habitat restoration. This example is therefore illustrative of some of the challenges and potential approaches that can be taken.